Design YOUR Practice for Success … and...

Designing YOUR Practice for Success … and Profit!

NSAA Continuing EducationNovember 28, 2009

Brian Watkinson, Strategies 4 Impact! ©20091

fDesign YOUR Practice for Success… and Profit!

Brian WatkinsonOAA, FRAIC, Int’l Assoc. AIA


Business of the Practice• Plan your Business

– You wouldn’t start building without a plan … – Focus your ideas, dreams

•maintain focus = consistency• consistent application of resources• consistent messages

– Markets– Services– Character

• Brains <> Grey Hair <> Procedure

– Competition




Planning YOUR Business (cont’d)

– ValueG th– Growth

– HR recruitment/retention– Transition and succession– Financial success – sustained profitability– Financing g– Personal and professional fulfillment– “Brand”

Planning YOUR Business (cont’d)

• Inputs– External inputs– External inputs

• “Trends”

– Internal inputs• goals and interests of the leadership of the practice, e.g.– Personal and professional goalsp g– Definition of “success”– Remuneration and “standard of living”– “What you LOVE to do!”

• goals and interests of “the team”




What is a Strategic Plan?

Three central questions ...

1. What do we do?2. For whom do we do it?3. How do we excel at doing it?

Five years ... regular, formal review...

What are the components?

• Vision• Mission • Values • (Operating Philosophy)• Strategic Objectives/Goals

– Metrics

• Tactics (Initiatives, Actions)




VisionGraphic depiction of the future state of the organization.– Defines the culture, reflects beliefs and values

• “The Network is the Computer”- Sun• "McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding p g gquality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

Mission

Description of the purpose of the organization.

• “To change the world through technology”– SONY

• “We excel at moving people”GO T i– GO Transit




Values – e.g.

• LeadershipR ibilit

• ProfessionalismC it t• Responsibility

• Accountability• Transparency• Integrity• Trusted

• Commitment• Passion• Education/Professional Growth

• Communications

Strategic Objectives/Goals

defines the specific directions needed to be t k t f ll t Mi i dtaken to successfully execute Mission and achieve Vision




What Goals?

• those features of the organization which if gdone properly yield success

• short list of things that must be done right• if not, won’t be successful in executing Mission and achieving Vision

• short list > greatest ROIg• typically 5 to 7• Metrics!

Strategic GoalWe will develop and implement a comprehensive, high quality in-house education program that will:

b ld d l- support our team in building new and relevant skillsets which will help them grow their careers and their sense of self-worth; increase their ability to deliver greater value to the practice; and, also be transportable- support recruitment and retention of staffdiff ti t f titi- differentiate us from our competition

- enable us to provide a wider range ofleading edge services to our clients- enable us to access new markets




MetricsSuperior Professional Development and Full Suite of Educational Choices- increased spcific skills on our team- recognized as able to deliver wider range of valued services to current clients AND a bigger marketplace- regularly beat the competitionregularly beat the competitionregularly able to recruit and retain talent in a highly competitive marketplace

Tactics/Initiatives/Activities• Engage consultant• Develop and articulate the vision and pstrategy for the education program

• Identify and make policy decisions that will shape the program

• Communicate to team, clients, public• Develop quality assurance framework• Identify content – broad/specific• Identify developers/deliverers




Recap: What is a Strategic Plan?

Three central questions ...

1. What do we do?2. For whom do we do it?3. How do we excel at doing it?

Five years ... regular, formal review...

Recap: What are the components?

• Vision• Mission • Values • (Operating Philosophy)• Strategic Objectives/Goals

– Metrics

• Tactics (Initiatives, Actions)




A Few Words on “PROFIT”• Profit is not a “dirty word”

– ROI – “a cushion” - cycles AND bad debts– Invest in technology– Invest in HR – recruit, train and retain – R and D– Marketing and Business DevelopmentChange management– Change management

– Continuous Improvement - ConEd– Sustainability– Growth and expansion– retirement




Elements of a Business PlanExecutive Summary1. Business Overview1. Business Overview2. Industry Overview3. Market Overview4. Business Development Strategy5 Operating Plan5. Operating Plan6. Action Plan7. Financial plan8. Risks and Conclusions

Business Overview

• Business History• Ownership and Attributes• Vision, Mission, Strategic Objectives• Services• Pricing Strategy• Regulatory Environment• Growth and Development Plans




Industry Overview

• Info Sourcesf• Size of Industry

• Relevant Service Segments• Trends in the industry

– Outlook

• Competition– Numbers and description– Competitors’ SW– Pricing

Market Overview

• Info SourcesM k t S t( )• Market Segment(s)– Your target and its outlook

• Trends in the Market• Specific ServicesP i i i th k t l• Pricing in the marketplace

• Market Risk Factors– response




Business Development Strategy

• “Marketing” and “Promo”• Target clients (customers)• Potential partners/subs• Value Proposition – USP • Pricing Strategy• Competitive Position• Promotion Strategy• Marketing Strategy

Operating Plan

• Location • IT• Business Structure• Management • HR• Physical facilities

• R and D• Service Delivery• Oper’g Policies• Financial PoliciesPhysical facilities

• FFE• Communications

• Financial Policies• Regulatory• Risk




Action Plan (Implementation)

• Specific, key activities - prioritiesf• Reasonably detailed description for each

• Completion dates• Responsibility/accountability• Resources• Metrics

Financial Plan

• Projected revenues• Pro Forma Income Statement• Pro Forma Balance Sheet• Pro Forma Statement of Cash Flows




Risks and Conclusions

• If you don’t … f /• High level summary of KEY risks/response

– Economic– Market– Business development– OperationalOperational– Financial

Top TrendsTop Trends

Affecting the Design and Construction Sector




DESIGN!

• We assume that products of our competitors h b i ll th t h l ihave basically the same technology, price, performance and features. Design is the only thing that differentiates one product from another in the marketplace. – Norio Ohga, Sony

No Economy is an Island

• The “Great Recession” of 2008? 2009?• Emerging economies• Emerging economies

– G7, G8, G20 >>>>> G2?

• BRIC– Harper’s tour

• Free trade• Free trade• Tax structure• Infrastructure investment• GDP? Unemployment?




Some Key Industry Trends …

???




Stimulus Spending

2??

The Economy

• Global• Canada• Canada• Design and Construction Sector• Sector in YOUR region• YOUR marketsC l• Cycles …

Monitor and keep your data current …Be prepared to course correct.




Focus on YOUR Market

• Know your marketf• Know how it is performing

– demand– demand for businesses in that market

• Know what the future holds for it …

Climate hchange and

economylinked?linked?




Sustainable Design• 70’s• CSRCSR• Climate Change, Recycling, Gridlock• Smart Growth, Places to Grow• LEED Leadership in Energy and Environmental DesignLeadership in Energy and Environmental Design

• Politics• Gov’t Policy – Cap and Trade?

Sustainability

“Smarter Sustainability Practices N d d f C di G thNeeded for Canadian Growth: Conference Board” October 3, 2006

“Economic growth and concern for the physical environment need to be integrated into a single concept of sustainability.” g p y




Hubbert Curve© 2009

What’s It Mean?

• Climate changef• Carbon fuel depletion – “Drill baby drill!”

• Pollution• Impact on health and well-being, quality of life

F i– Future generations

• Economic impacts




LEED®

Recladding

50%

© 2008

50% nowzero by 2030

Leading to ... ?

• Buildings ~ 40% energy/carbon• “on the path to zero”• Macro or micro grid?• Operating (96) v. Embodied (4)

• Leadership ????




?

Opportunities? Threats?

• capital cost increment less than believed • innovation and risk• new tech• construction process• new complexities?• specialists? Design, construction, ops?

– LEED® AP

• need for robust systems




Risk Transfer• Historically, AEC has always involved risk

– Business risksBusiness risks– Construction risks– Designers’ risks– Owners’ risks

• Is Risk Increasing?• “risk allocation”, “risk sharing”• All too often … “Risk transfer”• What additional risks?

So, TRANSFER what risks???

• ScheduleB d t

• SubsoilsE i l• Budget

• Finance• Performance• Users• Changes in law

• Environmental• Operational• Energy Performance and Energy Costs

• Innovationg• “Fitness for purpose” • …




Risk Management/Mitigation

• Transfer it• Quality Management• Insure• Price it and charge for it• Extra resources• Sell extra services• Take longer• ...

Aggressive Procurement Strategies

• For builders, “Supplementary Conditions from h ll”hell”

• For designers, “RFP’s from hell”• reverse auctions – construction AND design• Lowest, LOWEST, LOWEST PRICEO id d• One-sided contracts

• Risk managers, lawyers, insurers, procurement advisors, fairness commissioners




Traditional DBB

Owner

Designer Contractor

Traditional DBB

Owner

ContractorRFP’s and Contracts “From Hell” –

increasingly adversarial

Designer

“Induced” Adversarial Relationship




Government Policy

• Affordable Housing … C b T C d T d• Carbon Tax vs. Cap and Trade

• Climate change and sustainability• Globalization• Immigration policy

l / l l• Green Belt/Planning Legislation• “red tape world”• Infrastructure investment

Government Policy

• Accessibility Standards in Ontario• Building Codes• Bank of Canada• AIT• Regulatory• Municipal bylaws• Design review by municipalities• Procurement ... ORC




Demographics

• General Population Demographics– use “boomers” as e.g.– also cultural diversification, women in the workplace, post-secondary education trends…

– “The aging of Canada’s massive baby-boom will be the underlying demographic force affecting labour supply AND demand for goods and services.” Conf Board of Canada 2006

Demographics (cont’d)

• Boomers, e.g.– the big wave is moving along aging– the big wave is moving along - aging– but, also living longer – “60 is the new 40”– differing

• interests• needs

t ti f i ti• expectations from previous generations

– affects • Demand• Supply




Demographics (cont’d)• Supply

– talent cruncha e c u c• attracting and retaining qualified people

– design as a career?

– impact from changes in “attitudes” … Millenials• Internet, instant messaging, “fearless”, iPod generation• work/life balance• end of “life long careers”• “loyalty” ??• impatience for a “better lot”• retirement?

Demographics (cont’d)

• Demandf l– new facilities

• service• recreation• live/work

– new/different kinds of facilities– new population centres– what about under-used schools, etc.?




Infrastructure Deficit

• Infrastructure of all kinds– including public buildings of all kindsg p g

• deferred (neglected!) maintenance• failure to replace aging infrastructure• failure to keep up with demand for new infrastructure

• estimates of deficit vary widelyy y– $123 B municipal (then add …)– Ontario $120 B

• Committed to $60B/ 10 yrs

Infrastructure Deficit

• $248 B and climbing 2B a yearf f f• By 2027 50% infrastructure at end of life

• “More $ than projects, more projects than people to build them”

• Taxes and fees up, services cutI f i i• Infra inventory; strategies

• “eye opening order of magnitude” for leaders




Integrated Project Delivery

“At the core of integrated practice are fully collaborative, highly integrated, and productive , g y g , pteams composed of all project life-cycle stakeholders. Leveraging early the contributions of individual expertise, these teams will be guided by principles of true collaboration, open information sharing, team success tied to project success, shared risk and reward, value-based decision making and utilization of full technologicalmaking, and utilization of full technological capabilities and support. The outcome will be the opportunity to design, build, and operate as efficiently as possible.”American Institute of Architects

Integrated Process• Is a sustainable design ESSENTIAL

– 4-5% add’l capital investment can yield 40%+4 5% add l capital investment can yield 40%+ energy savings BUT ONLY IF INTEGRATED DESIGN PROCESS IS USED

• Life Cycle Costing - “connect the silos”• Shared objectives, decisions & accountability

AND R d R– AND R and R• More clients seeking, promoting it

– GSA and other U.S. Clients– Ontario MOHLTC; Waterfront Toronto




SHARED

• vision

• objectives

• risk

• … and reward




“The 2 Silos”DesignC t ti

Facilities ManagementM i tConstruction

“Commissioning”Maintenance

Energy PerformanceOperations

FinanceFinance

Service and Ops

5%

95%

Design/Construction

Operations+ Asset Management

5%




“A Guide to Determining Appropriate Fees for the Services of an Architect”

Royal Architectural Institute of Canada


Owner

Project Facilitator

EnergyModel Design

Project

Users FM

BuilderProject = Shared Goal

Share Risk and Reward




Project Alliance

3Gain

Corp OH

Profit

Proj OH

$

2 Pain

Project Cost and OH guaranteed

Direct Proj Cost

1

j g

Profit and Corp OH at risk (pain)

Potential Gain if improve on “targets”

Project Alliance

GainD/C Reward

Owner Savings

D/C Reward

D/C RiskUnder Target

Over Target

PainOwner Risk




Performance ContractingMaximum Incentive

sign

Fee

TargetBase Fee

Beat the target

Miss the target

Des

Metric (e.g. Annual Cost of Energy)

Maximum Penalty

IPD - Less Re-work and Potential for Information Disconnects

DD

CD

Bid

Construction >>>

Project Lifecycle

SD

DD




IPD – Input Early

Impact of decisionsImpact of decisions

Cost of changes

Project life cycle

Greater Investment in Design

Impact of decisionsImpact of decisions

Cost of changes

Usual

Potential

Project life cycle to commissioning





• Raises lots of new questionsWh l d ?– Who leads?

– What are the rules of the game?– Risk?– Liability?– Insurance?H i l i d i l i– How to implement in adversarial environment that Canada’s AEC has become?

– Where are the standard docs?

New Delivery Models …

• “Disenchantment” with DBB– both Private & Public

• Introducing more risk transfer in DBB• D/B• CM• P3 (aka AFP)




What Does P3 Look Like in UK?

The Trust

SPV

Consultants

DB FM Equip/IT Finance

EnergyConsultants

P3s• “Near-total” risk transfer

– Pursuit • government response varies widely

– Design – What about Users making changes?– Budget– Schedule– “unknowns” (unforseeables?)unknowns (unforseeables?)– Finance– Performance– Operations and Maintenance




P3s• serious capacity concerns• “will it spread?”p

– it always has elsewhere– threshold dropping – as low as $25m?– or, “bundling”– Feds, provinces, municipalities, agencies, boardsT k R d i C d– Track Record in Canada

– health, corrections, justice, education, office …

• not “just a ‘big firm’ issue”• “strategy”

BIM

• what?• implications?• risks?




Fabrication

• Stick roof framing … • Habitat • Paul Rudolph’s New Haven residences 1971




Fabrication

Loblolly HouseKi Ti b l kKieran Timberlake

Fabrication

Home DeliveryHome Delivery MOMA2008




R nd DR and D

Fees, Fees, Fees




PSF?PSF?Or not?




Our Website is Under Development – Opening Soon

Led by architect and former Executive Director of the Ontario Association of Architects Brian W ki S i 4 I ! I id i d i d l i iWatkinson, Strategies 4 Impact! Inc. provides strategic support, advice and consulting services to

businesses in the design and construction sector, their associations and their clients.

Contact

[email protected]

416.409.7393

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